Hurricane Harvey shows why good governance is vital

The human costs of the flooding in Texas are heart-wrenching, as they are in Bangladesh and India, where many more have perished.

The disaster poses a stark reminder of the importance of a functional, amply funded government sector. One hopes (against hope... and the current reality) that Harvey will move Washington's discourse from shutdown, debt defaults and wasteful, regressive tax cuts to good governance, the absence of which is at the heart of the Houston disaster.

The disaster is in no small part a function of four intersecting problems: climate change, bad price signals, hyperbolic discounting and stagnant priors. True, those last three sound annoyingly technical, and to some extent they're just obscure ways of saying humans are programmed not to give a damn about the future. But let me briefly explain each in turn; taken together, they clarify the policy solution.

The role of climate change in exacerbating Harvey's impact has been thoroughly discussed, and the consensus was well summarised by two scientists writing the following in the Times: "Climate change doesn't cause extreme events. It amplifies them. And in any weather-related calamity, our susceptibility to harm is, at its root, constructed by ourselves." What they mean by that last bit is where these other problems come in.

PRICE SIGNALS Price signals are among the most important organising principles of capitalist economies. Scarcity, supply and demand, the extent of risk - we count on prices to convey critical information about these factors, and when they fail to do so, distortions and imbalances occur that, in the case of Harvey, were lethal.